AI and confidentiality in a consultancy engagement

A consultant signs an NDA that prohibits disclosing the client's information to any third party, and then pastes the client's board pack into an AI tool to summarise it; the tool's provider is a third party, the NDA is breached, and whether any harm follows depends on terms the consultant has not read. The problem is solved by a carve-out that permits tools meeting stated conditions, by using tools whose terms meet them, by de-identifying what goes in, and by knowing what to do when it goes wrong. I draft or review the AI provisions for the agreement for a fixed fee of £595, delivered in five working days.

Who this is for

Consultants and consultancies in England and Wales working under NDAs and engagement terms with confidentiality obligations, and clients who want to know what their consultants' tools will see.

What matters in AI and confidentiality

The NDA that prohibits third parties and the tool that is one

A standard NDA or engagement confidentiality clause prohibits disclosure of the client's information to any person other than the consultant's staff who need to know, permits use only for the engagement, and requires the information to be kept with the same care as the consultant's own, and entering the information into an AI tool discloses it to the tool's provider (a third party), uses it for a purpose the clause may not cover (the provider's processing), and places it under the provider's security rather than the consultant's; the breach is of the clause as written whether or not the provider does anything with the information.

The tool's terms and the difference between keeping and training

it is the provider's terms that say whether inputs are used to train or improve the models and how long they are held, and business tiers generally exclude training where consumer tiers permit it; a provider that trains on inputs may surface the client's information in outputs to others, a provider that retains inputs holds a copy the client did not authorise, and a provider that does neither and processes under a confidentiality obligation and a data processing agreement is closer to the consultant's own cloud storage than to a third party in the NDA's sense; the consultant reads the terms of each tool it uses for client work, uses business tiers whose terms exclude training and limit retention, and records which tools meet the conditions, because the carve-out clause will refer to them.

Reasonable steps, trade secrets and the client's own position

the business's trade secrets, confidential information and clients' data must not be put into tools that may retain inputs or train on them, which is what the reasonable-steps requirement in the Trade Secrets (Enforcement, etc.) Regulations 2018 and the business's confidentiality obligations demand; a trade secret is protected under the 2018 Regulations only while its holder takes reasonable steps to keep it secret, so a client whose consultant puts the secret into a tool that trains on it may lose the protection as well as the confidence, which is the client's reason for caring and the reason a client's own policy may prohibit tools entirely; the consultant's professional obligations and its insurance add to the consultant's reasons.

The carve-out clause that permits the tools the client will accept

The clause amends the confidentiality provision so that the consultant may process the client's information in AI tools that meet stated conditions (the provider is bound by confidentiality, does not use inputs for training, retains them only as the service requires, applies security at a stated standard, processes personal data under a data processing agreement, and processes in stated locations), treats that as a permitted use rather than a disclosure, makes the consultant responsible for the provider's compliance as for its own subcontractor, gives the client the right to restrict or prohibit tools on stated information, and requires the consultant to tell the client which tools it uses on request; a client's lawyer recognises the structure (it is how cloud storage and outsourcing have been handled for years) and accepts it where the conditions are real.

De-identification, the engagement that allows it and the one that does not

Removing the client's name, the identifiers and the parts that would identify the client or its counterparties before material goes into a tool reduces the exposure (a summarised anonymous contract is less of a disclosure than a named one) and is required by some clients' policies, and the clause can provide for it; but de-identification is not always possible (the client's business is identifiable from the facts, the personal data cannot be removed without destroying the usefulness) and is not a substitute for the carve-out, because an anonymised board pack that the provider trains on is still the client's information; personal data put into an AI tool is processed under the UK GDPR like any other, requiring a lawful basis, a notice to the people concerned, a data processing agreement with the provider under Article 28 and an impact assessment under Article 35 where individuals are affected, and de-identification that leaves people identifiable has not removed that.

The breach, the notification and the client that finds out

Where a consultant discovers that client information went into a tool outside the clause (a consumer tool, a personal account, a prohibited matter), the NDA and the engagement usually require prompt notification of the breach, and the consultant should delete the information from the tool where it can, find out from the provider's terms what has happened to it, tell the client what went in and where, and record the incident; where personal data is involved the client as controller may have a breach to assess under Article 33 of the UK GDPR; the clauses provide for notification and cooperation, the consultant's liability sits within the engagement's cap, and the consultant's AI use policy and its associate agreements, drafted separately, are what prevent the breach, with the clauses drafted for the consultant's standard terms or for the client's engagement letter and NDA.

What it costs

AI provisions in a contract, £595. Review or draft AI-specific terms in a supply or customer agreement. Five working days.

AI use policy, £995. Internal policy plus the accompanying contract provisions. Five working days.

Email me at geoffrey@caesar.co.uk with what you need and any documents, and I will confirm the scope and the fee in writing, usually the same working day.

What you get

• An internal AI use policy your staff will follow, rather than a document that bans everything and is quietly ignored
• Contract provisions covering output ownership, training data, confidentiality and liability
• A defensible position to give customers who ask what your AI governance looks like
• Review of your AI suppliers' terms, including what they reserve the right to change
• Practical guidance on what to permit, what to restrict and what to prohibit outright
• One round of amendments

What is not included

• Technical AI assurance, model testing or bias auditing
• Sector-specific regulatory approval
• Advice on non-UK regulatory regimes beyond flagging where they apply
• Ongoing regulatory monitoring

Questions I am often asked

Is pasting a client's document into an AI tool a breach of the NDA?

Under a standard NDA, yes: the provider is a third party and the use is outside the engagement. The carve-out clause permits tools meeting stated conditions as a permitted use; without it the breach is of the clause as written.

Does anonymising the document solve it?

It reduces the exposure and some clients require it, but it is not a substitute for the carve-out: an anonymised document the provider trains on is still the client's information, and personal data that remains identifiable is still processed.

What conditions will a client accept for AI tools?

The ones that already apply to cloud storage and outsourcing: confidentiality, no training on inputs, limited retention, security, a data processing agreement, stated locations, the consultant responsible for the provider, and a right to restrict. The clause states them.

Related guidance and services

• AI contracts and AI use policies, £595, the service this page describes
• SaaS and technology contracts, £995
• Data protection agreements and privacy terms, £795
• AI clauses in a consultancy agreement
• Reviewing an AI tool's data terms for customer data

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.